Inside vs. Outside Wave patterns, buying pullbacks at the best times

Inside vs. Outside Wave patterns

Wave Long = Buying a pullback

Wave short = selling a retracement

Wave pattern = breakout/trending market pattern

Sideways range are dangerous with a wave pattern if we don’t get higher highs or lower lows to confirm the BREAKOUT.

You need to avoid the fake-out breakout

Candlestick Patterns can be used for market sentiment on your trade management chart.

Try and look for BULLISH / BEARISH candlestick patterns on your trade management chart for clues and to build confidence into your trade.

Drawing trend lines

You can find the video in the advanced course and on the blog.

Crude Oil Inventories JUMP…why buy pullbacks?

The news out of the euro zone this morning about rising debt concerns has us expecting a dollar correlation that might be a little different.

Today we may see the Gold and the Dollar both rising as traders take profit (or dump) euro contracts and pick up the USD and the Gold to take shelter from the ‘storm’

830am est

We see Durable Goods orders are dropping. This tells us that fewer factories are creating and shipping products.

The first thing I think about is crude oil inventories at 1030am, and I will be using this info to make an educated decision.

Remember…we had Manufacturing Indexes from NY, VA, Philly all were LOWER than expected.

This leads us to believe the manufacturing sector in the US is slowing down.

Slowing will use less crude oil, and this will be a variable we use later today.

I will be suspicious of FALLING inventories at 1030am est today.

845am est

We review our news today and we know today’s 1030am crude oil inventories will be something to watch closely.

We’re expecting to see a late morning move after 1035am, but with the GDP number at 830am on Thursday we may see traders take off early and wait for the news tomorrow.

Tough to tell right now, but we will be looking for the late morning move, and if it never shows up we know why.

Lets review my dollar index:

89range chart shows me…

Strong bull price channel, we are in the middle

Bull Wedge, and we have broken above the highs

Swing Traders would use the 89range to confirm a trend, and then stay net-short on their currencies and commodities.

We aren’t swing traders here in our trade room, we are intra-day traders, so we use a faster timeframe for more short-term trend.

34range chart shows me…

Trading sideways above the wedge highs

Big round number of 76.000

Bear channel off the highs

Lower highs and lower lows

BMT is below us

After review of the two timeframes on the Dollar we can tell that swing traders would have a strong uptrend, and day traders have no trend at all.

We have a bear channel, but is not very strong, it looks more like a sideways range. We may see new lower lows, and when that happens it will confirm the channel exits. (bear channel = buying pullbacks on Crude and Gold)

Sideways dollar = sideways markets on Gold, Crude, Euro, Russell, anything you want to trade.

Inside Day on the Dollar = Inside day on the markets we trade.

(think about Gold…its OUTSIDE right now…will it drop back down and become INSIDE just because of the dollar?)

No directional bias today (not yet)

I can buy the lows (support) and sell the highs (resistance) as long as the trade fits my rules.

945am est

Lets prep for the crude oil:

89range chart shows us inside a narrow price wedge at the highs of the major price wedge

The BMT is above along with big round number of 100.00 which will act like a price magnet

We see multiple sideways ranges, and we have the highs of these ranges right above us as well.

Lots of reason for the price to rise, but lots of resistance waiting for it.

Lets open your 34range chart and find the specific price levels we want to use this morning.

1015am est

We have yet to take a single trade this morning. We had reason to believe this morning might be a little slow ahead of the news, and we really don’t know if we will see anything after the news either (news at 830am tomorrow)

Lets plan our trades on crude oil:

If price rises:

- Sell the highs of the wedge at 99.54

- Sell the highs of the channel at 99.54

- Avoid the 89range bmt at 99.74

- Avoid the big round number of 100.00

- I will sell the resistance levels first, then look for new higher highs and then buying pullbacks.

- I do NOT buy the highs, I buy pullbacks.

- I will sell resistance levels at 100.09 (high risk around the BRN)

- Selling at 100.37, 100.42, 101.46

If price falls:

- Im buying at support levels first, and then selling retracements with new lower lows.

- I will avoid the BMT on all chart timeframes

- Avoid the OPEN at 98.78

- Buy the lows of the channel and the lows of the range at 98.43

- Buy the LOD at 98.20

- Buying PLOD 97.85 and buying at 98.12, 97.90, 97.85

- And then buying the lows of the bull channel in blue trend line around 97.50

-

I am waiting for 10:30am to begin trading on crude oil now its after 10:15am and price action will be nasty.

1025am est

We wait for 1030am news and while we wait we prepare for the rest of our morning.

Lets review the Gold Futures:

Strong bull channel that took price from low to highs and broke new highs above the major wedge.

The BMT is well below us, so this will act like a price magnet.

We have a sideways range below us on gold, so look for that to be a price magnet as well.

At the highs of the channel, at the highs of the range, and levels pulling it lower.

This along with the dollar dropping tells me to buy pullbacks with rising prices on gold.

If the buyers fail at these highs, look for price to tumble all the way down to 1500.00 and the BMT.

Chart Trader Function in NinjaTrader 7

Chart Trader Function:

- Apply the chart trader by using your chart properties

- If you load your template it will do it for you automatically

- Use this just like your DOM (market, limit, ATM strategies, etc)

- I like to use it for trade management, and use my dom for the entry.

- When used correctly you can get a lot of important information and react to it quickly.

- The most important use of this tool is that it allows me to use the BIG PICTURE support and resistance as my guide for trade management.

Fast Track:

How long do we allow for it to trigger?

The longer it takes to trigger, the higher the risk.

The best trades happen when the trigger comes quick.

We often times see the best trades when price is almost moving too fast.

5 minutes is longer than enough time to see the trade trigger.

If the speed slows down, then its HIGH RISK

If the speed picks back up we can take the trade.

If the pattern sets up, but we don’t break the new highs/test the trigger line within 5 minutes I soon become concerned.

Using the PHOD:

We had price above the PHOD so we assume the markets buyers are in charge.

We also see the BMT/OPEN and the previous range is below us.

Example:

We are above the PHOD so we assume the buyers are in control. We then buy pullbacks to profit from this position > PHOD.

If we start seeing the speed slow down, the momentum overbought on 89range, lack of buyers at new highs, we then begin to look for the 3 signs of price reversal.

When we see the reversal coming, we know EXACTLY where price wants to go.

Expect price to drop back to the PHOD and if we enter below the PHOD expect the PLOD to be tested.

1 contract day trading:

You need to be more selective with 1 contract

This goes against what most 1 contract traders are capable of doing

That is why trading 1 contract can be a gift and a curse.

It won’t take away all your cash, but as a new trader we have hard time being selective and this is the MOST IMPORTANT times we must be.

Which market is the easiest for new traders?

It all depends on your personality, the market’s personality, and your long/short term trading goals.

Use the Fast Track Method on any market you chose to see a SAFE and HIGH % look at how to trade that market.

Spend 2 weeks and LISTEN to every tick of the morning/afternoon or overnight session (whichever you want to trade)

Custom Trade Worksheet in the Advanced Course.

Russell / Gold / Euro

Crude is very whippy, so use your time to get acclimated with crude.

Gold is great when it moves, and the Russell has $500 margins with $10/tick so its also great market for new traders.

Dollar Rallies on Debt Concerns in Europe, Crude Trades sideways and Gold hits new swing highs

News out of Europe this morning has traders concerned that European leaders will have trouble getting the EU Debt under control. This caused the euro to drop overnight and the dollar pushed to the highs of its trading range. We will see how the rest of the day looks as it develops into the US trading session.

We have a lot of news to watch today. 8:30 we have Durable Goods Orders which is a very strong leading indicator of the US economy, followed by Home Prices at 10:00 and then our big number of the day will be at 10:30 for Crude Oil Inventories. We will also be doing a special members training today at 11:30am EST.

Wednesday’s are always the same for the most part, I will be watching for the 3 phases of Crude Oil before, during, and after the news to make the best trading decisions today.

The Dollar Index is currently trading sideways after making new highs from the news overnight out of Europe. The 89Range chart shows us above the Price Wedge highs, and in the middle of the big bull price channel. Rising prices on the dollar will result in falling commodity prices across the board, so we will be looking for selling opportunities when the dollar makes new swing highs.

Then look a little faster at the 34range chart on the dollar and you can see we are REALLY trading sideways, not just a move up, but I can see lack of confidence from the buyers at the highs, so we will have to look for more confirmation from the dollar before we can assume a directional bias. At this time we will be using a sideways market on the dollar, but keeping an eye on a rising dollar today from the concerns in Europe.

Crude Oil Futures are still trading around the 100.00 Big Round Number this morning, and still trading in the middle of this price wedge, just below the BMT. My goal trading with a price wedge is to buy the lows, sell the highs, and avoid the middle.

I will use these important price levels to plan my specific plan of attack today on the CL 07-11 contract. One thing I cant help but notice are the large candlestick ‘wicks’ you can see on this 89range chart. Those long wicks are signs of confusion, lack of direction/confidence, and we know that the BMT overhead will act like a magnet. Keep a close eye on the price action today, it may be challenging seeing this already.

Gold made new highs overnight above the major resistance at 1526.8 and we look to see where the market will go from here.

We recently broke above the Price Wedge, above the highs of the sideways range, and with the PHOD and BMT well below us we know to expect price will want to come back down. However, we will keep our eyes on new highs above 26.8 and I will be buying pullbacks if the buyers maintain control to the highs. The Dollar has been sideways for the past 6 hours, and this will be a correlated market I will be watching. If the dollar takes off to the highs again I can expect a reaction on gold. I will be reading tape looking for clues to market personality with the dollar.

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Goldman Sachs & The Dollar Index made us profit today, here’s how

We have 2 news events this morning at 10am, New Home Sales will be the big one, but Richmond Fed Index will be used to interpret the crude oil inventories later in the week.

I will use the Dollar Index (read the tape) to interpret the market reaction when we have 2 news events in the same timeframe (10:00am est).

The Dollar is in a bear price channel on the 13range chart

We got news from Goldman Sachs overnight about rising commodity prices.

This made it easy for us to make a simple plan of attack.

Review the Slow Timeframe on Crude Oil:

NO CAD News today, and no inventories until Wednesday.

Price Wedge, same from last week. High is 99.50 and the lows 97.00

Sideways Range from 100.44 down to 96.37

Bear Price Channel, we are at the highs at 99.50 and the lows at 92.00

BMT is above us at 99.83 which will act like a price magnet. Great final target, poor entry location.

Review the Faster Timeframe on Crude oil:

Inside the wedge, sell the highs and buy the lows

Outside the wedge, buying pullbacks with new highs and selling at resistance overhead.

If price rises:

I’m selling resistance first, then look to buy pullbacks.

I do not buy at the highs, I wait for pullbacks.

Avoid the 99.85 BMT, 100.00 Big Round number

Sell the highs of the sideways range at 100.37-100.44

I will then look to buy pullbacks if we make new highs above 100.44

I will sell the highs of the Bull Channel

If price falls:

Im buying support first, then selling new lower lows with retracements.

I do not sell the lows, I wait for new lows and then a retracement.

I will be careful trading around the highs of the wedge @ 99.45 because its been very sloppy already this morning. (we would normally not worry)

Im buying 99.25 34r trigger line for 34r wave long

Buying the PHOD at 99.12

Buy the lows of the bull channel at 99.20 which is also the highs of the major 89range wedge.

Sell the new lower lows below the PHOD as a sign of the buyers failing and the sellers taking price down from the highs.

Below 99.12 we are in the previous day’s trading range, which will draw price down to the OPEN and BMT around 98.35

Our plan of attack on crude oil:

Trading inside the wedge, buy the lows and sell the highs of the wedge.

As price rises we buy pullbacks (the DX bear channel helps with this)

Sell the highs of the Price Wedge at 99.50

Avoid the 89Range BMT at 99.83

935am est

The dollar is dropping, but has gone sideways at the Previous Low of Day, this is a sign of indecision on the Dollar Index which will result in lack of direction on the markets we like to trade most.

All signs still point to buying pullbacks with new higher highs, but right now we may have to wait for some more direction from the dollar and then let the markets react accordingly.

1000am est

We get new home sales rising at 10am which should be dollar bullish.

We also have Richmond Fed Manufacturing Index drastically lower, and this is a big red flag.

The past two weeks we had the Empire Manufacturing, the Philly Fed Manufacturing, and now the Manuf report from Richmond, VA is lower.

This tell us that the manufacturing sectors in the US have been slowing down drastically.

Fewer products being shipped, consuming less Nat Gas and Crude Oil.

Im going to use this as a guide when trading crude oil inventories later in the week.

1035am est

We have found the bull price channels using the 13 and 34r charts, and its interesting how we still had the same results even not seeing that channel.

We knew we wanted to buy:

- Dollar Dropping

- Open > PHOD

- We broke above the highs of the Wedge

- New Higher Highs

- The 100.00 is a big price magnet

It also appears we have a few price magnets below us, which make for a late morning move:

- Everything is below us!

- BMT, OPEN

- PHOD-PLOD

- Price Wedge

1055am est

The markets are changing…no longer getting the consistency, we see less moves, and slower speed.

We know the dead zone is after the news this morning and before the European markets close.

Lets wait patiently and take the next high % trade in the best AREA we can find.

Where are the next HIGH % trades going to be?

- Buy the lows of the price channel at 99.20

- Buy the PHOD at 99.12

- If we break the below the PHOD we then assume sellers in charge, we look to sell.

- I don’t have much interest in the upside until we break well above the 100.00

- Above 100.00 I will then buy pullbacks.

1115am est

We need to wait for price to clear the 100.00 area and the 89range BMT

Look to buy pullbacks with new highs above the 100.05 but beware this market is whippy.

We want to wait now for the European close to possibly bring in some more volume and solid direction.

12:00pm EST

Price tests the PHOD, looking to sell the PHOD below 99.00 now that we see buyers fail at the lows of the channel.